Minister slates EU for 12th failure to balance its books

Europe's failure to produce proper accounts is an "annual embarrassment", the Treasury minister Ed Balls is to say today, in a harsh verdict on the Commission's bean-counters.

The Economic Secretary to the Treasury is condemning the failure of the EU's accounts to gain approval from its own auditors for the 12th year in a row. He is to tell MPs today that Britain will take the lead in reforming the management of the EU Budget.

His tough language will be seen as a sign that Mr Balls, who is seen as Gordon Brown's right-hand man, is prepared to reinforce the Chancellor's reputation for delivering harsh messages to fellow EU finance ministers.

Mr Balls flies to Brussels tomorrow for the debate in the Belgian capital between finance ministers over the 2007 EU Budget.

Today, he is to tell the annual conference of the Institute of Chartered Accountants in England and Wales that the failure to get the European Court of Auditors to sign off the EU's accounts is a disappointment. "Europe must do better to end this annual embarrassment," he will say.

At the same time he will deliver a written statement to MPs, pledging the Government to provide Parliament with an annual statement on all EU Budget spending within the UK and ask the National Audit Office to audit it.

At tomorrow's meeting, Mr Balls will urge other EU member states to follow this model. The Treasury said the proposal had already won support from the Netherlands and Denmark. The move is likely to be backed by the Commission, the European Parliament and the Court of Auditors.

Mr Balls will say: "All member states must accept their responsibilities to work together to achieve the clean bill of health for the EU's accounts that taxpayers deserve."

Four-fifths of EU spending is jointly managed between the Commission and member states, meaning countries have the power to ensure money is well spent within their borders, in particular by strengthening their management of agricultural and structural funds, and their controls against fraud. The European Commission in London was unavailable to comment.

Meanwhile, the ICAEW published its business confidence monitor, showing the first fall for five quarters. It said it was the first sign the latest rise in interest base rates to 5.0 per cent had had an impact on the economy.

Business confidence among companies employing fewer than 10 people hit its lowest level recorded since the survey began three years ago. Confidence in micro businesses, historically the most buoyant of business sizes and accounting for 95 per cent of UK businesses, fell to an index score of zero this quarter.